1. Field of the Invention
The present invention generally relates to a warehousing system and method, and more particularly, a warehousing system and method which may be used in a hybrid retail/warehouse facility.
2. Description of the Related Art
Many inventory-based businesses rely exclusively or heavily on the Internet. However, such businesses (e.g., dotcoms) have often failed, primarily because there are simply too few customers to carry costs. That is, the costs of fulfillment and operating overhead could simply not be covered with the actual customer base. However, the Internet customer base continues to grow by 25% each year, and so the potential for future profits appears evident. For instance, Amazon.com recently had its first profitable quarter ever.
A major barrier to growth for any inventory-based business is managing the physical warehouse, physical inventory, and fulfillment from warehouse to customer. Many companies sell “solutions” that include pick-to-light (PTL) or Dynamic Picking Systems, batch picking with tilt tray sorting, automated crane systems. A major problem with such conventional systems is that volume and throughput commitments must be established before capital and systems commitments are made. If the business plan is wrong and a warehouse faces unexpected expansion, it becomes quite expensive. If the business plan is wrong and the warehouse faces below target throughput, it is a financial disaster. Finally, if throughput is predictable, existing legacy systems are too expensive to change.
Any new initiatives especially retail based ventures must take a long hard look at fundamental economics, value chains and operating costs. For instance, one of the major economic inefficiencies in dotcom businesses is the Internet's dependency upon expensive “old economy” fulfillment channels. In addition, the dotcoms assume that any Internet retail business (i.e., “the e-tailer”) was just like mail order.
After the dotcom collapse none of the fulfillment companies filed for Chapter 11. All claimed 10% to 20% annual growth in new business as a result of the Internet and appear to have had positive Internet cash flows from day one. However the high costs and inefficiencies of these fulfillment channels cause conventional systems to be expensive and inefficient and were directly responsible for the demise of many dotcoms.
More specifically, three basic types of fulfillment systems have been used for retail Internet-based businesses: Central High Volume Automated Warehouse (National Fulfillment Channel), Regional Medium Volume Warehouse (Regional Fulfillment Channel), and Regional Low Volume Store/Warehouse (Regional Fulfillment Channel)
Many examples exist for the first type of system or mail-order model, some successful and some not so successful. The best known success of the second type of conventional system is Corporate Express, with revenues of over $4 billion. In this second type of system, inventive system 100 (e.g., the inventive fulfillment chain) can cut fulfillment costs by as much as 50%.
The third type of system (e.g., Store/Warehouse approach) has worked on a small scale and certainly minimizes capital required to launch any Internet business. However, merely using conventional retail store systems does not have the ability to scale. In other words, merely utilizing a different fulfillment channel without major modifications to the store does not make economic sense for many reasons.
The major advantage of the third type of system (e.g., the retail Store/Warehouse approach) is that the sunk costs associated with inventory and inventory management can be shared by both the Internet and direct in-store retail sales. However, this type of system has two major shortcomings that make it not scalable.
First, the “value chain penalty”. That is the product has come from manufacture to a pallet based central warehouse, broken down into “eaches” (e.g., single items), shipped to the store and prepared for shelf-based in-store sales. It has been handled maybe four or five times. The sunk cost for the product on the in-store shelf may be as much as 12% higher than if it were in an optimized “two touch” warehouse environment.
Second, inefficiencies created for the Internet business by an in-store environment where picking eaches and management of inventory is complicated and costly. For instance, many warehouse systems involve placing products on shelves and picking the products based on lights and displays attached to the shelf (e.g., a so-called “Pick and Put to Light” (PTL) system). These systems typically require physical addresses for each item and also require that a “picker” travel to the warehouse shelf to get an item.
Therefore, such conventional systems are inefficient and time consuming. For example, lead to pick rates of 100 or less per hour per employee are not uncommon. Indeed, the inventors believe the warehouse picking penalty for the Internet business might be as much as 4% on sales.
Thus, in the end the products will either cost more for the Internet customer, in addition to the actual fulfillment costs, or the products will cost more for in-store customer.
In addition, many warehousing systems, product distribution systems, and methods for storing items (e.g., medical devices such as heart valves, stents, endoscopes, sutures, shunts, etc.) are currently very inefficient. For example, many such items have an expiry date (e.g., a shelf life) after which the item is no longer usable and is thus, discarded. Currently, many such items are not used by their expiry date and are, therefore, discarded due to an inability to efficiently and effectively track inventory, store or warehouse these items.